[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2951 Introduced in House (IH)]

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117th CONGRESS
  1st Session
                                H. R. 2951

To direct the Secretary of the Treasury to modify Treasury Regulations 
         relating to insurance-dedicated exchange-traded funds.


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                    IN THE HOUSE OF REPRESENTATIVES

                             April 30, 2021

  Mr. Wenstrup (for himself and Mr. Suozzi) introduced the following 
      bill; which was referred to the Committee on Ways and Means

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                                 A BILL


 
To direct the Secretary of the Treasury to modify Treasury Regulations 
         relating to insurance-dedicated exchange-traded funds.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. INSURANCE-DEDICATED EXCHANGE-TRADED FUNDS.

    (a) In General.--Not later than the date which is 5 years after the 
date of the enactment of this Act, the Secretary of the Treasury (or 
the Secretary's delegate) shall amend the regulation issued by the 
Department of the Treasury relating to ``Income Tax; Diversification 
Requirements for Variable Annuity, Endowment, and Life Insurance 
Contracts'', 54 Fed. Reg. 8728 (March 2, 1989), and make any necessary 
corresponding amendments to other regulations, in order to facilitate 
the use of exchange-traded funds as investment options under variable 
contracts within the meaning of section 817(d) of the Internal Revenue 
Code of 1986, in accordance with subsections (b) and (c) of this 
section.
    (b) Designate Certain Authorized Participants and Market Makers as 
Eligible Investors.--The Secretary of the Treasury (or the Secretary's 
delegate) shall amend Treas. Reg. section 1.817-5(f)(3) to provide that 
satisfaction of the requirements in Treas. Reg. section 1.817-
5(f)(2)(i) with respect to an exchange-traded fund shall not be 
prevented by reason of beneficial interests in such a fund being held 
by 1 or more authorized participants or market makers.
    (c) Define Relevant Terms.--In amending Treas. Reg. section 1.817-
5(f)(3) in accordance with subsections (b) of this section, the 
Secretary of the Treasury (or the Secretary's delegate) shall provide 
definitions consistent with the following:
            (1) Exchange-traded fund.--The term ``exchange-traded 
        fund'' means a regulated investment company, partnership, or 
        trust--
                    (A) that is registered with the Securities and 
                Exchange Commission as an open-end investment company 
                or a unit investment trust;
                    (B) the shares of which can be purchased or 
                redeemed directly from the fund only by an authorized 
                participant; and
                    (C) the shares of which are traded throughout the 
                day on a national stock exchange at market prices that 
                may or may not be the same as the net asset value of 
                the shares.
            (2) Authorized participant.--The term ``authorized 
        participant'' means a financial institution that is a member or 
        participant of a clearing agency registered under section 
        17A(b) of the Securities Exchange Act of 1934 that enters into 
        a contractual relationship with an exchange-traded fund 
        pursuant to which the financial institution is permitted to 
        purchase and redeem shares directly from the fund and to sell 
        such shares to third parties, but only if the contractual 
        arrangement or applicable law precludes the financial 
        institution from--
                    (A) purchasing the shares for its own investment 
                purposes rather than for the exclusive purpose of 
                creating and redeeming such shares on behalf of third 
                parties; and
                    (B) selling the shares to third parties who are not 
                market makers or otherwise described in Treas. Reg. 
                section 1.817-5(f) (1) and (3).
            (3) Market maker.--The term ``market maker'' means a 
        financial institution that is a registered broker or dealer 
        under section 15(b) of the Securities Exchange Act of 1934 that 
        maintains liquidity for an exchange-traded fund on a national 
        stock exchange by being always ready to buy and sell shares of 
        such fund on the market, but only if the financial institution 
        is contractually or legally precluded from selling or buying 
        such shares to or from persons who are not authorized 
        participants or otherwise described in Treas. Reg. section 
        1.817-5(f) (2) and (3).
    (d) Effective Date.--Subsections (b) and (c) shall apply to 
segregated asset account investments made on or after the date that is 
5 years after the date of the enactment of this Act.
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